TerraForm Labs spent four years building the ecosystem and connecting it to other blocks before the event began earlier this month.
When TerraUSD algorithmic stablecoin (UST) lost its stake, millions of dollars were wiped out in a matter of days. Coins, which usually carry a bond that can be redeemed for dollars, are sold only for nickels. And LUNA, his government token, which last month had a market cap of more than $ 30 billion, has seen the metric slip to $ 680 million.
The company at the end of it all started in 2018.
Business partners Do Kwon and Daniel Shin founded Terraform Labs in January, and April registered as a private limited stock company. in Singapore.
In August, Terraform completed a $ 32 million raise that included Translink Capital, Polychain Capital, FBG Capital, Hashed, 1kx, Kenetic Capital, and Arrington XRP. The four largest crypto exchanges – Binance, OKEx, Huobi Capital, and Dunamu – are also investing in the Terra Layer -0 blockchain.
From the beginning, Terra wanted to be a payment giant that could compete with Alipay and PayPal. Shin, founder of Korean e-commerce giant TMON, will later help bring more than 20 other companies to the table to form the Terra Alliance and adopt the payment system.
In early 2019, Terra is on the rise $ 62 million with an initial coin offering (ICO) for LUNA government tokens, at $ 0.80 per LUNA. The team said it would be part of a “dual-token system, consisting of Terra-stablecoin — and Luna, collateral tokens.”
At deck slide the accompanying ICO also promised that the “Terra Stability Reserve” guaranteed solvency, “protecting it from speculative and regulatory risks that other coins are exposed to.”
Shortly after that – exactly a year after Terraform Labs registered in Singapore – the company launched Mainnet Columbus on April 24, 2019.
Blockchain is launched with several tools: a block explorer, a staking dashboard, and a registrar for presale investors to create wallets and manage LUNA tokens.
There are also tools for “simulation models to see how Terra’s stability mechanisms will respond to changes in macroeconomic variables,” Kwon said in a YouTube video uploaded the same day the mainnet was launched.
One of the attractions of the Terra ecosystem is the Anchor lending protocol, which was launched in July 2020.
This is referred to as the end “the gold standard for passive income in blocks. ” Before its demise, Anchor promised creditors it would generate an annual percentage of almost 20%, and its total locked-in value (TVL) increased to $ 17 billion — about 70% of all value in the Terra ecosystem.
The year Anchor was launched, investors who borrowed cryptocurrency from the Maker protocol only got an unscrupulous awakening.
Token Maker (MKR), created by MakerDAO, is used to support DAI stablecoin as part of the credit system. The protocol provides DAI to users who lock crypto, such as Ethereum, as a guarantee.
During what became known as Black Thursday, Ethereum’s price dropped below $ 100 causing DAI’s debt to become undercollateralized. At that point, the protocol automatically puts the ETH bond up for auction.
But due to network congestion and high gas prices, some bidders are able to buy liquidated assets at a very low $ 0 price tag. That means the people who sold Ethereum for a loan that is currently unsecured have lost everything.
“The Keeper system relies on arbitragers to fund liquidations on a discretionary basis, which can result in liquidity crunches at times of high market volatility leading to huge losses for borrowers,” Nicholas Platias, Terra’s head of research, wrote in a Medium blog post.
He was linked to a send reddit of missing users 281 ETH.
“Liquidation contracts, on the other hand, are fully guaranteed and include a long withdrawal period,” Platias wrote, “to provide stability in the face of temporary shocks.”
After the crash, Anchor just $ 100 million worth of UST and AVAXAvalanche original token.
Doing well in other parts of the dual-token system, Terra announced the launch of stablecoin in September 2020.
But less than a year later, it faced a strong macroeconomic headwind.
China was in the midst of cracking down on Bitcoin miners, and UST lost its dollar peg for the first time on May 22, 2021. Terra’s stablecoin algorithm lost its dollar peg for the first time, and traded for $ 0.95 for two days, according to CoinMarketCap.
Later that year, the last piece that would make Terra’s collapse a disaster was moved to space. In October 2021, Terra joined Wormhole and Cosmos IBC, a bridge chain that will allow users to transfer funds to the blockchain from someone else.
The day after Wormhole’s announcement was posted on the Terra blog, the total locked-in value (TVL) of the project exceeded $ 5 billion for the first time, according to DeFi Llama. When Terra joined IBC, there was UST $ 2 billion in circulation and the ecosystem had assets of more than $ 9 billion.
With all these cuts, Kwon began accumulating Bitcoin in his reserve wallet, saying that he wanted to finally have $ 10 billion of Bitcoin supporting UST.
“It’s not 10B a day – as UST’s funding source grows a portion of the seigniorage will go to build a bridged BTC reserve for the Terra chain,” he said in a tweet in March. “We have 3B funds ready to deploy these reserves, but the technical infrastructure (bridges etc) is still not ready.”
Right before Terra’s UST lost its dollar peg on May 9, at Luna Foundation Guard Bitcoin backup has grown to 42.5 BTC, at a time worth $ 1.4 billion. But when the price of Bitcoin started to tank, UST some pegs and will eventually drag LUNA, the TerraForm Labs team, and thousands of investors down.
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